Our August edition of the Dispatch kicks off with capital raisings - it's great to see these in what has been a difficult environment for funding. Energy transition continues to be a hot spot for our clients, with the wider market keen to understand how these transactions come to life. In this edition we put a spotlight on APA's acquisition of Basslink - that recently walked away with Restructuring Deal of the Year at the Turnaround Management Association's Australian Annual Awards and Australasian Law Awards.
Craig Rogers, Gareth Howe, Mandy Tsang, Luke Woodward, Vishal Ahuja, Jack Hill and Will Heath worked with a team to advise APA Group (APA) on its AU$1.7 billion acquisition for Alinta Energy's Pilbara business. The capital raising to fund the acquisition was one of the largest we've seen this year! We're definitely seeing APA Group making the most out of the energy transition in this latest deal. The assets will provide APA with a new growth platform to operate remote-grid energy solutions for the resources industry in Australia.
Anthony Boogert and Scott Bouvier led a team to advise Silicon Quantum Computing (SQC) on its AU$50.4m Series A capital raising, a significant achievement on their quest to create the world’s first logical qubit in silicon.
Continuing in Capital Markets, Jonathan Grant, Claire Rogers, Dale Rayner, Peta Stevenson, Luke Mulcahy and Wendy Yuan worked with a team to advise Commonwealth Bank of Australia (CBA) on an investment in Wollemi Capital, as part of the global climate specialist investment firm’s Series A capital raising.
A cross-practice team of Mark Upfold, Jonathan Grant, Cheng Lim, Rebecca Finkelstein, Intan Eow, Caroline Coops, Ruth Rosedale, Josh Thorneycroft, Cliff Sandler, Jason Kwan and Luke Mulcahy worked with a team to advise Vector Limited (Vector) on the 50% sale of its New Zealand and Australian smart metering business, Vector Metering, to investment vehicles managed and advised by Queensland Investment Corporation (QIC). The sale transaction valued Vector Metering at an enterprise value of NZ$2.5b and resulted in gross proceeds to Vector of NZ$1.7b.
Spotlight on Basslink
What is the deal?
- Basslink is an electricity interconnector between mainland Australia and Tasmania. It had suffered a highly publicised outage in 2015/2016 which led to a series of disputes impacting Basslink’s secured financing arrangements. KWM acted for the syndicate of banks owed more than AU$650 million.
- On 12 November 2022, administrators and the Former Receivers were appointed to the BPL Group, closely followed by the appointment of KPMG as receivers and managers with sole and exclusive control of the asset.
What were the commercial issues?
- For much of the receivership, Basslink for the first time in its history traded on the open energy market. This was a result of disputes between Basslink, the State of Tasmania and Hydro-Electric Corporation (a government enterprise) and the receivers regarding the historic offtake arrangements governing the revenue received by Basslink. The receivers commenced urgent Federal Court proceedings seeking to preserve the economic value in the project.
- The ongoing disputes raised a series of complex legal, commercial and regulatory issues for the receivers and the secured creditors in seeking to recover their loans through the receivership. The primary banks all sold their debt to the APA Group which was seeking to acquire Basslink through a credit bid acquisition structure. A competitive sale campaign was designed and implemented by FTI Consulting as replacement receivers.
What was the opportunity and legal solutions?
- The orderly sale of Basslink to the APA Group, and the resolution of the difficult underlying disputes involving the State of Tasmania raised extremely challenging legal, commercial and regulatory issues. The commercial positions of the various stakeholders required careful negotiation and navigation in an environment of material risk to all parties, including the secured creditors.
- A competitive sale campaign was designed and implemented by FTI Consulting as replacement receivers, with KWM's advice. The transaction ultimately achieved all objectives and resulted in an orderly sale of the asset to a motivated and highly credible bidder. The risk of disruption to Basslink’s nationally significant operations was avoided.
- KWM had been involved with Basslink for more than 15 years, essentially since the inception of the Project. Our team’s deep understanding of the asset and the complex regulatory environment it operated in, contributed to the ultimate success of the transaction. We worked seamlessly across state borders and with multiple stakeholders across different technical disciplines to support the outcome.
- More broadly, the transaction demonstrates that appetite for Australian infrastructure assets remains strong and that good outcomes can be achieved through competitive sale processes. There remains significant opportunity for strategic buyers and private capital investors to use creative ways to get their hands on high quality infrastructure assets in Australia, including using our insolvency procedures where appropriate.
- The acquisition of Basslink by APA Group demonstrated the strategic use of a secured debt acquisition and credit bid to acquire a nationally significant infrastructure asset. You can read more about what credit bidding is and how it was used in APA’s successful acquisition of Basslink.
Who was the KWM team?
The KWM team was led by Partner, Tim Klineberg (Head of Restructuring & Insolvency, Australia) with support from Partner, Tony Troiani (Restructuring & Insolvency), Partner, Mark Vanderneut(Mergers & Acquisitions) and Senior Consultant, Andrew Monotti (Energy) as well as Senior Associate, Zoe Kaesehagen and Solicitor, Sebastian Grant-Preece from the Restructuring & Insolvency team.
There were also several important contributions from our wider teams based in our Melbourne and Sydney offices. We recognise the wonderful contribution of specialist Energy & Projects partner Dominic Bortoluzzi, who was instrumental to the matter and sadly passed away in January 2022 before it completed. Dominic is very sadly missed by our entire team.
